The April 5th ISA deadline has long been a cue for savers to top up their ISAs and take advantage of the annual tax-free allowance, which was increased to £15,000 for cash ISAs in last year’s budget.

However, interest rates on current accounts are as high 5% while the best rate for an instant access cash ISA are only 1.5%, which could mean a difference of almost £111 on a full ISA allowance of £15,000 for a basic rate tax payer.

Even higher rate tax payers could earn more with a highest rate. As our tables below show, the only time the best ISA beats the best current accounts is for those paying the highest 45% tax rate.

* up to £2,500, 0% on everything above £2,500 ** above £3,000, up to £20,000 ***up to £2,000, 0% on everything above £2,000

Shunning savings for current accounts

So what are the UK’s savers doing? We surveyed 6,500 people and found that:

almost a third (31%) of people use their current account to save, and a further 35% would consider doing so

young people (24%) and Londoners (28%) are the most likely to use their current account – shunning traditional savings accounts and ISAs

just a quarter (25%) know the rate of interest on their current account – men (32%) are almost twice as likely as women (18%) to know

more than half (51%) are seeing their money languishing on rates of less than 1% – just one in ten (10%) are enjoying the best rates of more than 3%

Low interest rates

Interest rates have been stuck at rock bottom lows since 2009, which has been good news for borrowers but bad news for those with savings who struggle to find decent rates for their cash deposits.

Most current accounts don’t pay interest more than 1% on cash deposits and with the best instant access cash ISAs only paying around 1.5%, it can seem like savers don’t have many options to put their money to work.

ISA basics

Any interest earned in an ISA is tax free (but the amount you can invest in one is limited to £15,000), whereas any interest earned in current accounts is taxed at the marginal rate.

This means, depending on your existing income and tax bracket, you will be losing either 20, 40 or 45% of your interest to the tax man if you put your money in a current account.

Though this looks set to change in the 2016/17 tax year, when the first £1000 of interest earned will be tax free for basic rate taxpayers and the first £500 for 40% taxpayers.

The Competition and Markets Authority (CMA) will launch an investigation into personal current accounts.

The move is a reaction to the dominance of the ‘big four’ banks in the current account market – Lloyds, HSBC, Barclays and RBS.

Commenting on the announcement David Mann, Head of Money at uSwitch, said: “This is an important first step towards fixing the many ailments of Britain’s broken banking sector.

“The iron grip held on the current account market by the big four banks has bred a culture of complacency. Consumers can see virtually no difference between the services offered by different banks and, as a result, dissatisfaction levels are running high.

“We will only know that competition is working effectively when banks start putting customers at the heart of their business strategy, and deliver a world class service. The quicker reform happens, the better.”

What will the investigation focus on?

At present the ‘big four’ banks control approximately 77% of the personal current account market, and 85% of the small business banking market, according to the CMA.

This has lead to concerns from the CMA about:

low levels of customers shopping around and switching;

limited transparency, and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts;

continuing barriers to entry and expansion into the sector, limiting the ability of smaller and newer providers to develop their businesses;

very little movement over time in the market shares of the 4 largest banks, which provide over three-quarters of personal and business current accounts.

The CMA will launch a ‘full investigation’ into the industry to see how competition in the sector can be encouraged.

Better service for individuals and small businesses

“Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.

“The Market Reference Group will investigate in detail and decide what action, if any, may be needed to improve competition for the benefit of personal and small business customers.”

Want to switch bank account?

Current account switching service - This has made it simpler to switch to a new account. Switching your account should take no more than seven days and all your Direct Debits should be automatically transferred to your new account.

There have been 1,203,334 current account switches in the past 12 months according to the Payments Council, which represents a year-on-year an increase of 22%.

They attribute the increase to their Current Account Switching Service, which was introduced in September 2013 to make it easier to change bank accounts and create more competition in the consumer banking sector.

Gerard Lemos, Executive Chairman of the Payments Council, said:

“By making switching bank accounts easier for customers than ever before – with the added peace of mind delivered by the Current Account Switch Guarantee – we have created the perfect conditions for competition and choice to flourish amongst new and existing current account providers.

“These latest figures clearly suggest that the good news is getting through to all those customers who want to change provider – that there has never been a better time to do it.”

What does the Current Account Switch Service Guarantee?

To make it easy to change current accounts, the Payments Council demands that banks make sure that the following is possible:

The customer can switch on a date of their choosing

It should take no more that seven working days to switch account

Existing payment arrangements, those going out (e.g. Direct Debits and standing orders) and those coming in (e.g. salary), will be automatically transferred

Any payments made to or requested from the old account will be redirected automatically to the new account, for a period of 13 months after the switch date

Get an award winning current account

Switch current accounts - A more competitive banking sector means higher interest rates, cashback rewards and introductory offers with their current accounts to entice customers.

2014 uSwitch Current Account Awards - Based on the votes of 10,000 customers, with categories such as Most Trusted, Best Customer Service and Best Value for Money. First Direct offer the best current account, followed by Nationwide and the Co-op.

First Direct has ousted John Lewis to take the number one slot in a customer service index of UK brands, released today by consultancy Nunwood.

The index ranks companies across a range of customer service elements, including the time and effort invested into customers, customer expectations, corporate integrity, problem resolution and empathy with customers.

Nunwood say First Direct top the ranking by being easily accessible and employing people who care foremost about providing excellent service. First Direct customers enjoy “…being able to get straight through to someone who wants to help and is warm and empathetic,” according to Nunwood.

Financial services improving

While First Direct came top overall, financial service companies as a whole have improved their customer service this year. The financial sector as a whole improved its 2013 score by 2.2% – the biggest improvement all in sectors surveyed.

Source: Nunwood

The most improved score by an individual financial service company was Prudential, which moved up the ranking 163 places to number 48, followed by American Express moving up 123 places to number 49.

uSwitch Current Account Awards

The index matches the results of uSwitch research conducted earlier this year, which found First Direct to offer the best current account, followed by Nationwide and the Co-op.

The research shows that after more than half a decade of reputation problems, the banking sector is winning back the public’s trust with almost three quarters of account holders now trusting their bank.

A more competitive market: good for customers?

This improvement could be a result of banks making efforts to win and retain customers in an increasingly competitive sector, especially after the Current Account Switching Guarantee was introduced in September 2013.

The guarantee ensures switching current account is quick and simple. It now takes no more than seven days to move all your incoming and outgoing payments to your new account, including Direct Debits, standing orders, and payments going such as your salary.

Think your bank could do better?

If you’re not happy with the service offered by your bank there is nothing stopping you switching to a new account.

If you like the sound of First Direct, their 1st Account offers a £100 cash incentive to new customers.

But you can compare all current accounts to find out which one offers the service you want. You could find an account that offers you better interest, more cashback as you spend or other rewards.

The European Commission has proposed to cap the “interchange fees” that card providers can levy on retail transactions, at 0.2% for debit cards and 0.3% for credit cards.

Currently interchange fees in the UK can be as high 2.5% and are paid by the retailer. For example, on a transaction of £100 the retailer could receive £97.50, with the card provider taking £2.50. The British Retail Consortium estimates these fees costs UK businesses £1 billion a year.

A cap on the fee that card providers charge retailers has caused concerns that transaction costs could be passed onto consumers in the future.

The caps have yet to be introduced, but were voted in by the European Parliament. The proposal is currently sitting with the EU Council before being implemented across the common market.

Who pays the bill?

Retailers are claiming the interchange fee caps as a victory and they will pass their savings onto customers. However, banks and card service providers are worried about their revenues, as they can no longer charge retailers to cover the costs of card transactions.

They believe that the consumer will lose, as service costs will now have to be passed onto their cardholders and we will see no reduction in the cost of shopping baskets. As put by a spokesman for the British Bankers Association ‘inevitably somebody has to pay for increases in costs caused by regulation and that can mean consumers.’

Will retail prices stay the same but your card fees go up?

Spain and Australia have had fee caps for some time. Whilst there has been no fall in retail prices according to a report from European Economics for Mastercard, cardholders in these countries still enjoy fee free credit and debit cards.

Despite this, the report estimates that in the UK “…the average debit card fees would increase by between £0.24 and £12.58, while average credit card fees would increase by between £12.24 and £16.81.”

However, according to David Mann, Head of Money at uSwitch, this is unlikely: “These changes will not have any substantive effect on the average person, what they will most likely mean is the end of the era of free rewards credit card,” he says.

What does this mean for consumers?

The costs to consumers might not necessarily be implemented as fees, they could be “hidden” by reducing rewards on cashback cards or high interest bank accounts as banks try to recoup losses. The good news is, the card market is highly competitive, so if you’re not getting enough from your credit or debit card you can easily switch.

Switching current accounts could deliver better interest rates, lower fees or cashback as you spend, it’s worth shopping around to find an account to meet your needs.

By changing credit cards you could enjoy cashback on transactions, free credit for up to 36 months, pay no foreign transaction fees or collect Avios and other reward points.